“It’s also been stated that the Xbox One is ten times more powerful than the Xbox 360, so we’re effectively 40 times greater than the Xbox 360 in terms of processing capabilities [using the cloud]. If you look to the cloud as something that is no doubt going to evolve and grow over time, it really spells out that there’s no limit to where the processing power of Xbox One can go. I think that’s a very exciting proposition, not only for Australians, but anyone else who’s going to pick up the Xbox One console.”

In all seriousness, this is a reasonably good idea, though I would hope that it isn't a requirement. Maybe it could be done in such a way that it is optional, so you can get a 4K version using the cloud?

As for Sony vs Microsoft, Sony do own Gaikai so they are probably capable of matching it

I watched the hardware discussion the designers of the Xbox One had after thw announcement and they were talking about how developers could offload things like AI and physics to the cloud to free up the CPU and GPU